A historical look at the long-term performance of election year investments.
Every four years the question comes up – how will the presidential election affect the economy? If you’re feeling nervous about investing during an election year, consider a historical perspective by American Funds®. They looked at hypothetical results of investing $10,000 in the S&P 500® Index during the previous 18 presidential elections.
In 17 of those election years, the $10,000 investment would have gained value 10 years later. Investors in 14 election years would have doubled their return and there were a few instances that pointed to a tripled return.
Best & worst election year investment performances
George H.W. Bush presided over the best 10 years beginning in 1988. A $10,000 investment in that election year would have grown to an astonishing $52,448 in just one decade. George W. Bush had the worst return beginning in 2000 when $10,000 would have been reduced to $9,090 after 10 years. The dot-com crash in 2000 and the financial meltdown of 2008 were part of that 10-year period and may have contributed to the poor returns.
Recommendation for election year investments
History tells us that long-term investors who began investing in any election year have generally come out ahead, regardless of the winning party. Since your investment time horizon is likely to be much longer than a four-year presidential term, try to look beyond the headlines, focus on long-term goals, and avoid attempting to time the market.
*Adapted from American Funds Investor News: Sept. 30, 2016
Gifting to Charity from Your Required Minimum Distribution
If you are over 70 1/2 with an Individual Retirement Account (IRA), you are required to take distributions. You can authorize the custodian of your account to make payments (gifts) directly to qualified charities—it’s a tax efficient thing to do.
If your income is high, you may lose some of the tax deduction if taking on Schedule A, but you’re likely to keep the complete deduction when the gift comes directly out of your IRA. You can give the complete required minimum distribution to charity and avoid having to declare or pay any taxes on the distribution because it is going to a qualified charity.
If you have already taken your distribution for the current year, plan ahead for next year.
